Why We Shop 'Til We Drop (and Still Aren't Happy)

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Scads of studies over the past decade have found that spending
money on life experiences — vacations, dinners, outings and the
like — makes people happier than purchasing material goods. So
why do we keep buying so much stuff?

The answer has to do with a failure of forecasting, new research
suggests. People realize that experiences will make them
happier than things, researchers report today (April 2) in
the Journal of Positive Psychology. But they mistakenly believe
that experiences aren't a good value for the money.

"Where the mis-forecast comes in is where people feel that life
experiences are going to produce no economic value," said study
researcher Ryan Howell, a psychologist at San Francisco State
University. After the fact, however, people do recognize the
monetary value of their memories, Howell told Live Science.
Understanding that error of prediction could help people direct
more of their money toward experience — and happiness. [ 7 Things That
Will Make You Happy ]

Experiences vs. stuff

The idiom that
money can't buy happiness is only sort of true. Psychologists
have found that monetary purchases can indeed boost happiness.
The trick is spending money on experiences. Not only do tropical
vacations and wine tours make people happy, revisiting the memory
of these experiences keeps that happiness going over time.

Nevertheless, the data suggests people in the United States are
becoming no more likely to spend their money on trips to the
Caribbean than on buying new things. People may be becoming even
more materialistic, Howell said.

To find out why, he and his colleagues conducted a series of
studies. They suspected that people might be underestimating the
amount of happiness they would get from experiences and
overestimating the joy of things. But their first two studies
blew that notion out of the water. Both in online participants
asked to envision future purchases and in students asked about
actual purchases, people were quite good at estimating the amount
of joy they'd get from spending their money.

Where they failed, however, was in estimating whether an
experiential purchase would be a beneficial use of money.
Pre-purchase, people felt experiences weren't a very good deal,
economically speaking. This feeling turned out to be mistaken,
however; when asked about the monetary value of the experience
after the fact, people felt they had, in fact, gotten a good
deal.

In a second set of studies, participants chose between spending
money on experiences versus material items. Half of the
participants were randomly assigned to consider their
satisfaction with the purchase on economic terms, while the other
half were asked to weigh how much the purchase would influence
their happiness.

People asked to prioritize economic value chose to spend money on
material items, while those asked to consider happiness picked
experiences more often.

False trade-off

"I think they sort of see it as a simple trade-off," Howell said.
Before a purchase, "they're at this fork in the road, this idea
that 'If I want to be
happy, I'll buy life experiences, and if I want good value,
I'll buy material items."

Fortunately, as the post-purchase surveys found, this is a false
dichotomy. People do feel like their experiential purchases was
money well spent. People may have a tough time making this
prediction simply because they aren't used to evaluating the
economic value of experience, Howell said.

"If you think about the marketplace of material items, we buy and
sell and can resell them and think about giving them to
Goodwill," he said. There's no such resale market for memories.

"Because we don't do it, when we go to predict it, it's hard to
do," Howell said.

Ideally, Howell said, people would take these findings into
account when making purchase decisions. Being aware of
subconscious errors in predicting happiness could help people
spend their dollars more wisely.

"If they can stop and think a little bit more critically about,
'Wait, am I really underestimating the value of this? Am I really
trying to think I'm going to be trading value versus happiness
when I'm really not?' Then maybe people would be more
experiential in their consumption," Howell said.